The Australian Government has provided clarification on the tax treatment of military personnel who used a now-closed superannuation loophole.
On July 1, 2017, the Government closed a loophole that allowed some superannuants to reduce their tax obligations on their superannuation income streams by electing to treat their income as a series of lump-sum payments. The measure was announced as part of the 2016-17 Budget.
Revenue Minister Kelly O'Dwyer said that, prior to the Budget announcement in May 2016, not one military invalidity pensioner or military personnel was using the loophole. However, she explained that after the announcement was made, "a small number of military invalidity pensioners decided to change their arrangements to utilize the loophole, and reduce their tax obligations, prior to its closure."
According to O'Dwyer, since September 2016, around 390 out of 11,800 military invalidity pension recipients have elected to make use of the loophole.
O'Dwyer confirmed that "none of the individuals who elected to use the loophole will be subject to any back payment of tax, however they will no longer be able to use the loophole from July 1, 2017."
She added that the change impacts the way benefits provided by the Commonwealth Superannuation Corporation are treated, but not those provided by the Department of Veterans' Affairs.